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Pros and Cons of Franchise Businesses
by Jim Brown

For the individual owner, there are definite advantages
to franchising, some of which are outlined in the list

Pros of Franchise Businesses

Well-known trademark, either regionally or nationally, and
its cumulative goodwill - saving the business owner the
cost of creating and advertising a name that customers
already recognize.

Established business framework - minimizing the startup
problems and guesswork involved in starting a new business.
Well-tested sources of supply and service - saving time and
trouble in finding suppliers of needed products and

Ongoing sales and marketing assistance - franchisors have
proven, existing, and successful systems of advertising and

Financial assistance - banks and similar lending
institutions are willing to lend money to a business that
has the backing of a successful franchisor. Most
franchisors have direct financial assistance or help in
finding adequate sources of financing.
Reduction of risk - you are buying into an established
concept so the risk of failure is lower.
Ongoing research and development - most franchisors
constantly research and look into vital information such as
competition, product demand, seasonal variations, and
community attitudes.

Site selection and business support - the franchisor helps
with selecting a suitable site location, building
construction design and supervision, employee training, and
operational support.

Proven operating methods and procedures for creating and
selling the product.

Standard quality, uniformity, and desirability of the
franchisor's product or service.

Collective buying power and centralized purchasing system -
franchises may be able to purchase supplies at a reduced
cost since the franchisor can purchase in bulk and pass the
savings to the franchisees.

Furthermore, with franchising expansion seems to come more
naturally. Operating a successful franchise may quickly
lead to building a second and then a third business, and so
on. In fact, some franchisees own all businesses of a
particular franchise in an entire geographical area.
Fortunes have been built this way.

However, despite the advantages to franchising, buying or
starting a franchise business is not for everyone. Some of
the disadvantages to franchising are discussed in the list

Cons of Franchise Businesses

Loss of control and freedom - since the franchisor's
standards have to be adhered to, a franchisee may have
limited scope for individual personal initiative.
Ongoing royalties could be as high as 10% (or more) of
revenues - this amount could determine whether you business
is profitable or not.

The initial franchise fee can be quite substantial. It can
range anywhere from $4,000 to $20,000 and, in some cases,
up to $50,000!

Advertising fees - there is usually a fee for advertising
on a regional or national basis. If the franchisor does
not make the best use of your advertising dollars, this
could be a waste of money.

Required Signage - most franchisors have a developed sign
package that the franchisee is required to purchase. This
can be very expensive for the small business owner.
The franchisor's problems are also your problems - for
example, you could have a serious issue if there was a
conflict between the franchisor and a major supplier.
In summary, despite the disadvantages of owning a franchise
business, it generally offers real advantages with
considerably reduced risks over going it on your own. All
franchises are not created equal and research and due
diligence should be done before starting or buying any
franchise business. Franchising cannot guarantee a
profit. You, as the business owner, are ultimately
responsible for the success or failure of the venture.

Buy a Business or Sell a Business on GlobalBX.
GlobalBX is a free business for sale listing exchange that
provides a confidential forum to facilitate the buying and
selling of businesses with thousands of businesses and
franchises for sale as well as comprehensive business
information for business buyers and business sellers.

This article courtesy of http://www.investment-index.com.
You may freely reprint this article on your website or in
your newsletter provided this courtesy notice and the author
name and URL remain intact.

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